MARKETS

Hogsback tips a consumer reaction to the latest attacks on coal

AT FIRST glance there does not appear to be a connection between industrial strife at some of Queensland’s coal mines, the looming carbon tax and proposed emission laws at US coal-fired electricity plants but <i>Hogsback</i> has spotted the link – consumer power bills.

Tim Treadgold

In all three cases there is a common thread called power cost and who ultimately pays the bills.

The strike action by unions in the Queensland coalfields is currently confined to the mainly metallurgical, or steel-making coal, of the BHP Billiton Mitsubishi Alliance which in theory means the cost of any wage rises or staffing arrangements will be met by steel makers, or deducted from BMA’s profits.

However, anyone who imagines that BMA is the sole target of militant coal unions has been living on a different planet to The Hog for the past 40 years.

In time, the claims for fatter pay packets, shorter hours (which means the same thing), or more “family friendly” rosters (which also means fatter pay packets) will be passed down the coal chain like a pig passing through an Anaconda.

When the process is complete, everyone using electricity generated by coal in Australia will face higher power bills – and that’s before the cost of the looming (but increasingly uncertain) carbon tax is factored into the mix.

The US situation, despite involving technical specifications on emissions from new power stations, is also really just another cost, albeit one wrapped in the cloak of environmental protection policy.

Making new power plants comply with strict new laws, which might kill plans for some power projects, will have the twin effects of limiting investment in coal-fired power, forcing consumers to buy expensive power from renewable sources, while also boosting investment in gas-fired electricity.

Whichever way the US situation is analysed, the end result is the same as what’s happening in Australia – consumers will be forced to pay more for electricity under the combination of environmental controls, carbon emission laws and industrial action.

At first glance, that is a grim picture for the coal industry which has become the number one punching bag for governments keen to win the environmental vote.

But the latest developments effecting coal in Australia and the US are really doing little more than accelerating a consumer revolt and that means an electoral revolt.

The first whiff of consumers saying they were tired of “nanny state” politics, which has done little except force up the cost of living, came last weekend in Queensland when the biggest political swing in Australian history threw out a once popular premier and her government.

The same issues which ended the rule of Anna Bligh can be seen at work on a national level where voters are more than disillusioned with energy and environmental policies that are forcing up the cost of living.

The big one, which gets ever closer, is the carbon tax.

By the time it arrives, even when cloaked in feel-good, save the planet politics, consumers will be asking why they have to pay the price.

The answer is that they do not have to pay the price of subsidising expensive renewable energy schemes and dubious technologies which might never work, when all that is required is encouragement for the world’s most cost efficient form of power generation – coal.

Now is not the time for the coal industry to state its case that clearly.

The political pendulum has started to swing back towards common sense but has not swung far enough.

Queensland was a start. When the big new “lower carbon” power bills start to arrive it will be the ideal time for coal to raise its head and point out that it is the solution to the problem of keeping electricity costs at an affordable level.

It’s when you look at the “coal vs its detractors” situation in that way that the common thread between US and Australian events becomes clearer.

The proposed US laws, announced mid-week by its Environmental Protection Agency, will ban the construction of new coal-fired power plants unless they incorporate equipment to limit the emission of carbon dioxide to 1000 pounds for each megawatt hour of electricity produced, a challenging level given the best most modern plants can achieve is 1600 pounds.

The other problem for the US is that around 48% of its electricity currently comes from coal.

By inhibiting new coal-fired power stations, or by making them much more expensive, someone will have to pay – and that someone is the consumer.

In time, as the cost burden grows and unless there is concrete proof that the costs are delivering benefits that consumers can see, there will be a consumer revolt.

The Hog just hopes he is around long enough to see it happen.

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